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Tuesday, October 23, 2001
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The Board of Commissioners met in regular session at 5:30 p.m. in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Chairman Ronald Callen called the meeting to order.

Motion made by Commissioner Christian, seconded by Commissioner Royal, to approve the minutes of regular session held July 24, 2001 and special session held October 8, 2001.

THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING.

BWL employee, Joseph Davis, President of Local Union 352, IBEW, spoke on two issues. The first matter concerned the union’s grievance against the BWL’s Share the Success program, which is set for arbitration on November 12, 2001. He stated that he would hope management and the union could reach settlement prior to the arbitration date. The second issue pertained to the customer choice program for water service installations. He voiced his objection to contracting inspectors to check BWL water service installations in the City of Lansing. He invited the Commissioners to meet with union leadership to discuss this issue in greater depth and to take a closer look at the customer choice program.

General Manager Joseph Pandy responded to issues raised with respect to the Share the Success program. He handed out a summary of management’s position on this controversy. With respect to customer choice, he reported that of the 21 customer choice jobs, BWL employees inspected eight of the jobs, BWL retirees inspected five, and Tetra Tech employees inspected eight in order to meet the seasonal workload schedule. Mr. Pandy urged union employees to meet with him anytime to discuss their issues. To clarify a statement made by Joseph Davis, Mr. Pandy said that there is no reference in the Lansing City Charter that states work in the City is required to be performed by BWL employees.

BWL employee Michael George spoke regarding the positive experiences he has had under the leadership of Production Director Richard Peffley. He credited Mr. Peffley and others for facilitating the purchase of a home under the BWL’s Home Ownership Program for Employees. He also shared a personal story related to the September 11^th terrorist attack at the World Trade Center. Mr. George was attending a meeting in the BWL’s Administration Building and learned of the attack through Mr. Peffley. This was a coincidence because Mr. Peffley was unaware that Mr. George’s brother worked on the 14^th floor of the World Trade Center. Mr. George was able to see the CNN coverage of the terrorist attack while at work. He expressed his gratitude to those staff members who were present in the BWL conference room for their care and concern during his personal ordeal. He reported that his brother was safe. Mrs. George was also present and expressed her appreciation to all those who assisted with processing the necessary paperwork for the Home Ownership Program and making home ownership a reality.

BWL employee Michael Stanley remarked that symptoms of indiscriminate cost cutting include the BWL Share the Success program, bargaining unit employees injured at Eckert Station, and the recent catastrophic failure at Erickson Station. He stated that bargaining unit employees are suffering because of this, and asked how long it will be before Lansing customers will suffer because of cost cutting measures.

BWL employee Mickey Fountain remarked he has been employed at the BWL for 17 years as a maintenance mechanic. His BWL involvement has included serving on the Mutual Gains Team, Process Safety Advisor, 90/10 Bonus Program participant, bargaining and non-bargaining spokesperson for the Maintenance & Construction Resource Center, and recently appointed to the post of IBEW Local 352 Health and Safety Director. Mr. Fountain stated that Share the Success (STS) is an innovative program, which has benefited the organization, customers, and employees. He has been involved in the STS Performance Measures Committee for three years and found it to work well. He noted that both bargaining and non-bargaining employees have the opportunity to participate as well as the General Manager. Mr. Fountain stated that to date it has been perceived he voted to not participate in the process measures portion of the STS program. He stated for the record that he did not vote not to participate in the process measures portion of the BWL STS program, but rather he voted “no” to not change the program as the IBEW Local 352 contract stated in respect to the STS program. He indicated that this issue could have a long-term effect on the organization.

Greg Starks, 240 Woodlawn Avenue, Lansing, spoke on three different topics. As a political columnist for the City Pulse, a local newspaper in Ingham County, he urged the Commissioners to give some consideration to his suggested commentary in a recent article, which proposed turning the Ottawa Power Station into a major art museum. He noted that there are eight major abstract expressionist artists that have flourished in the post-war period. One of them is Clyfford Still (1904-1980) whose collection of 2,000 pieces of artwork lay in abeyance waiting for an American municipality to dedicate a museum to the presentation and preservation of his work all in one space. His second topic pertained to considering alternative providers for cable and telecommunication services. Mr. Starks serves as chairperson of the Lansing Cable and Telecommunications Advisory Board. He suggested that the City of Lansing and the surrounding communities might do well to consider the possibility of alternative providers for cable and telecommunication services. He noted that the BWL is a natural candidate for serving as the franchise holder. The third issue related to noise caused by a steam release valve that went off on the morning of October 23 at Eckert Station at 5:15 a.m., 5:43 a.m., 5:58 a.m., and 6:07 a.m. Mr. Starks indicated the decibel level was somewhere around 150. He noted that between the noise problems and vacuuming out the ashbin, it is a personal irritation when these events happen in hours when most people are sleeping. He suggested performing these procedures at a more suitable time of the day.

General Manager Pandy responded that venting of steam when units are brought on or off-line causes the noise. Generally units are brought on to meet weekday load on Sunday evening rather than early morning. Mr. Pandy gave assurance he would investigate and discuss this with staff to work out a schedule that will not disturb the neighborhood.

Production Director Richard Peffley commented on the BWL Home Ownership Program for Employees. He stated that in addition to Michael George, there were other BWL employees who encountered obstacles in processing paperwork for the Home Ownership Program for Employees (HOPE). He credited General Manager Pandy, Chief Financial Officer Dana Tousley, Human Resources Director Linda Gardner, and Human Resources Employee Relations Administrator Wendy Bradley for their role in modifying the application process. Mr. Pandy noted that last year the Board approved budgeting $30,000 per year for the HOPE program to provide loans to six employees per year. One more grant is currently in process for fiscal year 2001-02.

COMMUNICATIONS

The Human Resources Committee met on September 4, 2001 to receive a report on the Board of Water and Light Employee Satisfaction Survey, conducted by Market Strategies, Inc., (MSI) and to review performance appraisal results for the three staff positions that report to the Board; namely, the General Manager, Director of Audit and Metrics and Corporate Secretary.

Committee members present were Commissioners Callen, Christian, Haggart, and Royal (Chair). Commissioners Creamer (committee alternate) and Duncan were also present.

Communications Director John Strickler presented an overview of the employee satisfaction survey results conducted and compiled by Market Strategies, Inc. He reported that a self-administered mail survey was distributed to all 736 BWL employees in late June 2001. The survey was unchanged from the 1999 survey, with the exception of one addition being an open-end question for additional comments. A total of 322 (44%) employees mailed the completed questionnaire directly to MSI as compared to 52% in 1999. The objectives of the survey were to assess the following:

Survey results indicated that the BWL improved significantly on all components, but particularly for job security and issues regarding senior managers. Findings indicated there is still substantial room for improvement on management issues. Feedback and evaluation is still a weaker index and has large impacts on other components in the employee satisfaction model. The workload component saw minimal improvement. Several of the workload issues relate to other components and items that have weak scores.

Mr. Strickler reported that management initiated a series of focus group discussions with employees as a follow-up to recent union elections. Lisa Crumley of Pace & Partners was present to give a brief overview of the findings from four distinct employee focus groups held with clerical, technical, professional and supervisory employees in April and June 2001. Ms. Crumley emphasized that Pace & Partners was very cognizant of protecting the employees’ confidentiality and anonymity. The purpose of the focus groups was to:

The fundamental, universal concerns identified across all four groups included the following issues:

Organizational Structure/Process

Workload/Resources

Management Communication

Mr. Strickler recapped management’s efforts in response to issues raised over the past year:

Þ Planning functions have been consolidated under the Assistant General Manager.

Þ Six-year financial forecast and the Growth and Expansion Task Force work have been communicated to employees. Management is in the process of organizing that information to present to employee in face-to-face meetings.

Þ Share the Success (STS) has been aligned with the strategic Business Plan for consistency.

Þ Strategic planning documents and non-bargaining job descriptions are to be completed by the end of this calendar year, and progression plans are to be completed by this fiscal year.

Þ A team of managers and directors continue to address issues. One of the objectives of the Business Support Process area is to develop on a monthly basis presentations on corporate topics to share with employees to make them aware of the direction the organization is moving.

Þ Management plans to intensify its communication, particularly with face-to-face meetings.

The Commissioners stressed the importance for management to understand how communication techniques will be different from last year. General Manager Pandy stated that management intends to move in the direction of trying to achieve a three-stage type of communication. A recent example of that was sending the results of the focus groups to all non-bargaining employees. The next step will involve soliciting employee feedback to assure a clear understanding of issues raised in order to prioritize them.

Commissioner Callen questioned whether the downsizing was appropriate in the sense of having the correct number of people needed to perform the work while maintaining a good safety record. The Commissioners concurred that a current business plan is central to the operation of the BWL. Management was urged to consider fundamental problems in staffing and the replacement of skilled employees. As the company moves forward in developing its communications strategy, management was urged to listen more and encourage more employee feedback.

Joseph Davis, President of IBEW, Local 352, addressed the committee on customer choice issues and the strain of downsizing the organization, while service to outlying communities continues to expand.

On motion by Commissioner Callen, seconded by Commissioner Christian, the Committee met in closed session to review performance appraisals for the three staff-positions that report to the Board. (6:55 p.m.).

Performance appraisals and salary increases for the staff positions reporting to the Board are administered according to the BWL wage and salary plan for non-bargaining administrative employees. Human Resources Director Linda Gardner reviewed the performance rating results completed by the Commissioners for each of the Board-appointed positions. Contract issues of the General Manager and his rating were discussed at length. No final decision was made. The Human Resources Committee recommends the following resolution:

Resolution # 2001-10-1

Resolution on Compensation Increases for
Board-Staff Positions - Fiscal Year 2001-02

RESOLVED, That the Director of Metrics and Audits Kellie Willson, and Corporate Secretary Mary Sova are hereby eligible to receive salary adjustments effective as of July 1, 2001.

RESOLVED FURTHER, That pay adjustments for the Director of Metrics and Audits and the Corporate Secretary based on their performance evaluations for fiscal year 2000-01 are hereby confirmed, as filed with Human Resources. Pay adjustments are to be awarded in accordance with the fiscal year 2000-01 performance increase matrix under which pay for performance is being administered.

Moved by Commissioner Christian, seconded by Commissioner Haggart, that the Human Resources Report be accepted as presented.

Moved by Commissioner Royal, seconded by Commissioner Duncan, that the Resolution on Compensation Increases for Board-staff Positions – Fiscal Year 2001-02 (Resolution # 2001-10-1) be adopted.

The Finance Committee met on October 23, 2001 to review the fiscal year 2001 audit of the Board of Water and Light Enterprise Fund.

Committee members in attendance were Commissioners Ernest Christian (Acting Chair), Charles Creamer, and Nancy Wonch. Absent was Commissioner Nancy Duncan. Also in attendance were Board Chair Ronald Callen and Commissioner Diane Royal.

External auditors from Plante & Moran, LLP, presented the results of the audit for fiscal year ended June 30, 2001 for the Board of Water and Light Enterprise Fund. External auditors present were Robert Edwards, CPA and Associate; Larry Cooley, CPA and partner; Frank Audia, CPA and partner; and Patricia Easton, CPA. They issued a standard opinion on the financial statements of the Board of Water and Light and answered questions raised by committee members. The auditors reported that they received the full cooperation of management and staff and had unrestricted access to senior management in the performance of their audit. The audits for the Employees’ Defined Benefit Pension Plan, Employees Defined Contribution Pension Plan, and Retiree Benefit Plan (VEBA) have been forwarded to the BWL Pension Fund Trustees for review at their annual meeting of October 23, 2001.

In the interest of time constraints, Chief Financial Officer Dana Tousley told the Board he would be mailing a written report on selected financial statistics with associated graphs to the Commissioners for information.

Quarterly Internal Audit Report

Director of Metrics and Audits Kellie Willson reported in her written report the status of the following issues in which she has been involved:

Ms. Willson reported that at the Board’s Special Meeting held October 8, 2001, R. W. Beck consultants indicated they would be looking at profitability by customer class in geographic areas for water and electric; however, analysis indicates data needed to accomplish this task is not available. Consequently, it will not be feasible to complete that phase of the work at this time. The timeline for R. W. Beck to complete their work by the end of December is on schedule.

Resolution # 2001-10-2

Resolution to Authorize the Filing of the Audits
with the City Clerk and the State Treasurer

Moved by Commissioner Royal, seconded by Commissioner Wonch, that the Finance Committee Report be accepted as presented.

Moved by Commissioner Christian, seconded by Commissioner Royal, that the Resolution to Authorize the Filing of the Audits with the City Clerk and the State Treasurer (Resolution # 2001-10-2) be adopted.

Background materials on items presented are on file in the Office of the Corporate Secretary.

Resolution # 2001-10-3
DEFINED BENEFIT PLAN

RESOLVED, That the amended and restated Lansing Board of Water and Light Defined Benefit Plan for Employees’ Pensions be adopted effective November 1, 2001.

Staff Commentary: The amended and restated plan includes the amended and restated plan effective 7/1/96 and amendments effective 7/1/97 (1^st amendment), 7/1/99 (2^nd amendment), 12/17/99 (3^rd amendment), 7/1/2000 (4^th amendment). This amendment and restatement includes a variety of changes related to compliance with various changes in applicable law and is recommended for approval by staff and drafted by Mr. Steve Jurmu at Foster, Swift, Collins & Smith, P.C., our pension benefits attorney. The attorney’s transmittal letter and a redline copy of the plan is attached for your review. The plan document will need to be submitted to the IRS for a determination letter, but this is considered a formality since there are no changes in benefits.

Moved by Commissioner Royal, seconded by Commissioner Chrisitan, that the resolution be approved.

Resolution # 2001-10-4
DEFINED CONTRIBUTION PLAN

RESOLVED, That the amended and restated Lansing Board of Water and Light Employees’ Defined Contribution Plan be adopted effective November 1, 2001.

Staff Commentary: The amended and restated plan includes the amended and restated plan effective 1/1/97 and amendments effective 1/1/97 (1^st amendment), 7/1/00 (2^nd amendment). This amendment and restatement includes a variety of changes related to compliance with various changes in applicable law and is recommended for approval by staff and drafted by Mr. Steve Jurmu at Foster, Swift, Collins & Smith, P.C., our pension benefits attorney. The attorney’s transmittal letter and a redline copy of the plan is attached for your review. The plan document will need to be submitted to the IRS for a determination letter, but this is considered a formality since there are no changes in benefits.

Moved by Commissioner Royal, seconded by Commissioner Christian, that the resolution be approved.

Resolution # 2001-10-5
SURPLUS PROPERTY – (Located on and through Wise Road Water Conditioning Plant Property

RESOLVED, That the following parcel located in the City of Lansing be declared surplus and not required for Board of Water and Light operations. Further, that the General Manager and Corporate Secretary be authorized to enter into an agreement to transfer jurisdiction of this parcel to the City of Lansing Public Service Department subject to the requirements of State Law, the Lansing City Charter and Codified Ordinances.

PART OF THE N.E. ¼ OF SECTION 6, T. 3 N., R. 2 W., CITY OF LANSING, INGHAM COUNTY, MICHIGAN, BEING PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT THE EAST 1/4 CORNER OF SECTION 6, T. 3 N., R. 2 W. (AS RECORDED IN L. 7, P. 133 OF INGHAM COUNTY LAND CORNER RECORDATION CERTIFICATES); THENCE NORTHERLY ALONG THE EAST SECTION LINE 660.81 FT., MORE OR LESS, TO THE NORTH LINE OF THE SOUTH 1/2 OF THE SOUTH 1/2 OF THE N.E. 1/4 OF SECTION 6; THENCE WESTERLY ALONG SAID NORTH LINE 98.90 FT. TO THE SOUTHEASTERLY CURVED SIDELINE OF PLEASANT GROVE ROAD (80 FT. WIDE) AND THE POINT OF BEGINNING: THENCE 255.36 FT. ALONG THE CURVED ROAD SIDELINE ON A CURVE TO THE RIGHT WITH A RADIUS OF 612.96 FT. AND LONG CHORD BEARING S 57°14’10” W 253.52 FT. TO THE END OF THE CURVE; THENCE S 69°12’45” W 636.73 FT. TO THE BEGINNING OF A CURVE; THENCE 203.29 FT. ALONG A CURVE TO THE LEFT WITH A RADIUS OF 532.96 FT. AND LONG CHORD BEARING S 58°18’30” W 202.06 FT. TO A POINT THAT IS 190 FT NORTHERLY OF THE EAST-WEST 1/4 LINE OF SECTION 6; THENCE WESTERLY PARALLEL TO THE 1/4 LINE 110.03 FT. TO A POINT ON THE CURVED NORTHWESTERLY SIDELINE OF PLEASANT GROVE ROAD (80 FT. WIDE); THENCE 314.89 FT. ALONG THE CURVED ROAD SIDELINE ON A CURVE TO THE RIGHT WITH A RADIUS OF 612.96 FT. AND LONG CHORD BEARING N 54°31’20” E 311.44 FT. TO THE END OF THE CURVE; THENCE N 69°12’15” E 636.50 FT. TO THE BEGINNING OF A CURVE; THENCE 133.45 FT. ALONG THE CURVED ROAD SIDELINE ON A CURVE TO THE LEFT WITH A RADIUS OF 532.96 FT. AND LONG CHORD BEARING N 62°02’00” E 133.10 FT. TO A POINT ON THE NORTH LINE OF THE SOUTH 1/2 OF THE SOUTH 1/2 OF THE N.E. 1/4 OF SECTION 6; THENCE ALONG SAID NORTH LINE N 89°59’46” E 124.23 FT. TO THE POINT OF BEGINNING, CONTAINING 87,400 SQ. FT. OR 2.01 ACRES OF LAND, MORE OR LESS, AND SUBJECT TO EASEMENTS AND RESTRICTIONS OF RECORD, AND SUBJECT TO THE RIGHT OF THE BOARD OF WATER AND LIGHT TO OPERATE ALL EXISTING UTILITY LINES. THIS PARCEL IS SHOWN ON A SURVEY RECORDED IN LIBER 6, PAGES 376-379 OF INGHAM COUNTY CERTIFIED SURVEY MAPS.

Staff Commentary: This 80 feet wide by 1,090 feet± long parcel is located on and through the Board of Water and Light Wise Road Water Conditioning Plant/Wise Road 138 KV Substation Property and is currently utilized by the City of Lansing Public Service Department for Pleasant Grove Road. The past and current utilization of this parcel by the City of Lansing Public Service Department was approved by the Board of Water and Light without formal documentation. The purpose of this resolution is to formally transfer jurisdiction and liabilities for this parcel to the City of Lansing Public Service Department.

Moved by Commissioner Christian, seconded by Commissioner Haggart, that the resolution be approved.

Resolution # 2001-10-6
PURCHASE OF NEW DISK SUBSYSTEM FROM UNISYS/EMC

RESOLVED, That the Board of Water and Light enter into agreements with Unisys Leasing Corporation to finance the purchase of a new disk subsystem (Hardware, software, installation and five years pre-paid maintenance) from Unisys/EMC at a cost of $207,015 at an interest rate of 4.944% over 60 months. (See final Unisys pricing attached).

RESOLVED FURTHER, That the General Manager and Corporate Secretary are authorized to execute said agreements in such form as approved by the Staff Attorney.

Staff Commentary: Advances in storage technology have opened the door for BWL to significantly improve the mainframe-computing environment and save money in the process. The BWL’s current disk technology (EMC 9760) is about eight years olds, and although it is near maximum capacity (100 Gigabytes), an upgrade is not needed for another year or two. Currently a fee of $3680/month maintenance is being paid on this equipment, with an annual increase cap of 7%. However, the purchase of a new EMC Symmetrix 5630 system will increase storage capacity by 50%, provide significant additional reliability by having every drive “mirrored”, improve performance and provide a system that has significant functional improvements to support the organization’s IT infrastructure. The equipment would be leased for a five-year period at a monthly cost that will save the BWL $33,047, with savings realized in each of the five years. (See cost comparison.xls – attached).

This is new equipment and is only available from the Unisys/EMC partnership. Used equipment is available and quotes were evaluated from two “third party” companies for similar used equipment. Although the price for used equipment was slightly lower, there were serious concerns about hidden costs, maintenance capabilities and technical support from these third party companies. Direct purchase of new equipment from Unisys/EMC is recommended.

Moved by Commissioner Christian, seconded by Commissioner Duncan, that the resolution be approved.

Discussion: Commissioner Callen inquired about the operational advantages beyond the expected savings. General Manager Pandy responded that the operational advantages are derived by increasing the storage capacity by approximately 50%, and the system is backloaded and more reliable. Assistant General Manager Cook added that in addition to the performance issue, the economics is an added benefit.

Resolution # 2001-10-7
SURPLUS PROPERTY (along Pleasant Grove near Wise Road Conditioning Plant)

RESOLVED, That the following parcel, located in the City of Lansing, be declared surplus and not required for Board of Water and Light Operations. Upon completion of a real estate appraisal, staff legal review and negotiation of the sale price of the parcel, the parcel is to be transferred to the City of Lansing.

Beginning at the intersection of the northwesterly sideline of Pleasant Grove Road (80 ft. wide) and the north line of the South 1/2 of the South 1/2 of the N.E. 1/4 of Section 6, T. 3 N., R. 2 W., City of Lansing, Ingham County, Michigan; thence westerly along said north line 930 ft.; thence Due South 365 ft.; thence Due East 75 ft., more or less, to the northwesterly sideline of Pleasant Grove Road (80 ft. wide); thence northeasterly along said road sideline 932 ft., more or less, to the Point of Beginning, containing 4 acres of land, more or less, and subject to any and all existing utility uses of the Lansing Board of Water and Light, including maintenance, replacement and upgrades of existing water mains and water lines and associated appurtenances, and subject to all other easements and restrictions of record.

Staff Commentary: This 4 acre± parcel is located along the west side of Pleasant Grove Road and easterly of the Wise Road Water Conditioning Plant. The parcel is south of and contiguous to the City of Lansing’s Davis Park. The City wishes to construct and operate a skateboard park, softball field, nature trails, and other recreational facilities on this property. The City of Lansing is currently obtaining a professional appraisal of the value of this property.

Moved by Commissioner Creamer, seconded by Commissioner Royal, that the resolution be approved.

Discussion: Commissioner Creamer requested an update on negotiations with the City with regard to (1) Pleasant Grove near the Wise Road Conditioning Plant and (2) the property known as Comfort Street (a.k.a. Northwest Well Field).

General Manager Pandy reported that the parcel along Pleasant Grove adjoins the Benjamin Davis City Park. The City would like to acquire this property to enhance the recreational opportunities at the park. By approving the resolution, the BWL would show good faith to the City by indicating there is no utility need for the parcel. Once a real estate appraisal on the property is completed, negotiations on the price will begin. With regard to the Comfort Street property, Mr. Pandy reported that a decision on the transfer of this property to the Lansing Department of Parks and Recreation is pending. A tour requested by City Councilmembers and Commissioners is to be held. An amended resolution on Comfort Street is being offered as a late item on this agenda to clarify discussion regarding the harvesting of timber held at the joint meeting between the Board and Councilmembers on August 23, 2001.

Resolution # 2001-10-8
GRANTING OF EASEMENT

RESOLVED, That the Board authorize the granting of an easement to Ameritech Michigan for the placement and operation of communications facilities, for a consideration of five thousand dollars ($5,000.00), subject to the approval of City Council as required under Article 2, Section 5-203.3 of the Lansing City Charter. The Easement area is located on a portion of the north end of the BWL-owned Property (described below) located at 4800 Roscommon Drive:

The Property owned by the BWL is located at the southwest corner of the intersection of Roscommon and Woodbridge Drives in the City of Lansing, County of Eaton, State of Michigan and legally described as:

A parcel deeded to the Lansing Board of Water and Light by warranty deed recorded in L.627, P.366 of Eaton County, Michigan deeds described as follows: Beginning at the Southwest corner of “Glenburne No. 4”, L. 7, PP. 4-5 of Eaton County, Michigan plats; thence Northerly along the west line of Roscommon Drive 175.38 ft. to the south line of Woodbridge Drive; thence Westerly along the south line of Woodbridge Drive and its extension 100 ft.; thence southerly parallel to Roscommon Drive 175.38 ft.; thence Easterly 100 ft. to the Point of Beginning.

Beginning at the northeast corner of the property described above; thence west 100 ft., more or less, along the north line of the property to the northwest corner of the property; thence south along the west line of the property 25 ft.; thence east 17 ft.; thence north 17 ft.; thence east 83 ft., more or less, to the east line of the property; thence north along said east line 8 ft. to the Point of Beginning.

Staff Commentary: This easement has been requested by Ameritech Michigan to place and operate remote switching communications equipment. The equipment is designed to provide new digital services for the area and is part of an overall plan for Ameritech to upgrade telephone and data network facilities in the Lansing area. The BWL is not currently using nor has any foreseeable use of this portion of the Roscommon Drive property for utility purposes.

Moved by Commissioner Christian, seconded by Commissioner Royal, that the resolution be approved.

Resolution # 2001-10-9
COAL SUPPLY AGREEMENT WITH ARCH COAL SALES

RESOLVED, That the Board enter into a Coal Supply Agreement (Agreement) with Arch Coal Sales for the supply of Western Powder River Basin (PRB) coal subject to approval as to form by BWL’s Legal Counsel. The Agreement particulars are as follows:

Staff Commentary: BWL received five (5) viable bids for the supply of PRB coal with Arch Coal Sales submitting the best-evaluated bid. The other bidders who participated are as follows: Peabody Coal Company, Triton Coal Company, Enron NA and Aquila Energy Marketing.

The pricing submitted by Arch Coal Sales, coupled with the renegotiated rail transportation agreements with the Union Pacific Railroad and the Canadian National Railroad will allow BWL to minimize the increase in the delivered cost of PRB coal in 2002 to 14.7%.

Moved by Commissioner Royal, seconded by Commissioner Haggart, that the resolution be approved.

Discussion: General Manager Pandy called on Steve Brennan, Manager of Results & Construction, and Ron Ishimoto, Manager of Fuel & Transportation Services, to present a power point update on two proposed coal contracts (pertaining to Resolutions 2001-10-9 and 2001-10-10).

Mr. Ishimoto presented a history of the types of coal the BWL has burned since 1972 when Erickson Station came online. At that time BWL generating facilities were 100% on Ohio Basin coal with a sulfur content of 2% to 3%. In 1977-1978—through increased concerns over sulfur dioxide emissions—the BWL went from Ohio Basin coal to Central Appalachia coal (CAPP) at 12,500 to 13,000 Btu/lb with a sulfur content of 0.7% to 1%. This continued through the 1970’s, 1980’s and most of the 1990’s. Then in 1997-1998, staff investigated ways to reduce cost per kilowatt-hour, which pointed to coal from the Powder River Basin (PRB) in Wyoming. An overview of delivered coal supply for 2001 was presented for Eckert, Moores Park and Erickson Stations. The total coal burn expected for year 2001 is 1,650,000 tons, which is the most amount of tons burned in one year in the history of the BWL. Mr. Ishimoto reported on 2001 contract activities for coal and rail services and noted that three rail transportation agreements are pending. He gave an overview of (1) published U. S. prices for Powder River Basin coal and Central Appalachia coal for years 2000 and 2001, (2) U. S. coal production and consumption from 1998-2000, and (3) Electric Utility coal stocks for 1999-2000. Mr. Ishimoto stated that staff is in the process of (1) reviewing current coal and transportation procurement practices, (2) developing innovative options, such as exploring market opportunities, alternative coal supply regions and integrating existing agreements, and (3) moving in the direction of timely implementation of an integrated, market driven coal and transportation procurement strategy. Comparisons of delivered coal prices per Btu for the PRB and CAPP coal markets vs. using BWL transportation indicate substantial savings to the BWL for 2001and 2002.

Resolution # 2001-10-10_
COAL SUPPLY AGREEMENT WITH OXBOW CARBON AND MINERAL, INC.

RESOLVED, That the Board enter into a Coal Supply Agreement (Agreement) with Oxbow Carbon and Mineral, Inc., for the supply of western bituminous (Uinta Basis) coal from Colorado subject to approval as to form by BWL’s Legal Counsel. The Agreement particulars are as follows:

Staff Commentary: BWL received six (6) viable bids for the supply of Western bituminous coal with Oxbow submitting the lowest and best-evaluated bid. The other bidders who participated are as follows: RAG Inc., Luscar (Canada), C.W. Mining, Alley Cassetty Coal, and River Trading Co.

The pricing submitted by Oxbow Carbon and Mineral coupled with the renegotiated rail transportation agreements with the Union Pacific Railroad and the Canadian National Railroad will allow BWL to reduce the delivered price for coal in CY 2002 to its Erickson Station by 3.6%. Switching coal supply regions in 2002, from Central Appalachia to Colorado, provides BWL with the opportunity to reduce its delivered price of coal to the Erickson Station. If BWL were to remain in the Central Appalachia coal supply region, the estimated delivered price for coal in 2002 would have increased by 20.2%.

Moved by Commissioner Royal, seconded by Commissioner Haggart, that the resolution be approved.

Resolution was TABLED
USE OF SPECIAL COUNSEL

RESOLVED, That the General Manager be authorized to retain Rhonda Ross, Esq., and the firm of Warner, Norcross and Judd, at a rate of $240 per hour, as special counsel to draft a rules package to be presented to the Air Quality Division of the Michigan Department of Environmental Quality. The rule package will address start-up, shutdown and malfunction (SSM) issues associated with the operation of electric generating units. The name of Ms. Ross and her firm will be submitted to the City Attorney and, upon his recommendation, to City Council for approval. Use of Special Counsel is subject to the recommendation of the Utility Staff Attorney and the approval of the General Manager.

Staff Commentary: This firm and lawyer are being jointly retained and paid for on an equal basis by the BWL, Detroit Edison and Consumers Energy. The package of rules would deal with the exemption of excess emissions during periods of unit start-up, shutdown and unanticipated unit malfunction. With the recent (August 20, 2001) rescission of the existing Michigan Rules R336.1913 and R336.1914 covering SSM, the BWL would be greatly impacted without replacement rules. Rhonda Ross, the attorney that will be drafting the rules package, has specific experience dealing with air quality rules and regulations. Ms. Ross has been Director of the Air Quality Management Division of the Wayne County Department of the Environment and is experienced working with both state and federal environmental statutes.

It is expected that the total cost for the project would be near $30,000 to be divided equally between the BWL, Detroit Edison and Consumers Energy. Included in the cost would be a study of other state rules addressing SSM, and negotiations with the State of Michigan directly concerned with the acceptance of the proposed rules package. Ms. Ross bills at an hourly rate of $240.

Moved by Commissioner Royal, seconded by Commissioner Christian, that the resolution be approved.

Discussion: Commissioner Duncan requested clarification as to why the BWL is paying to draft rules for the State to adopt. She asked whether there is reason to believe that the Department of Environment Quality is receptive to utility companies drafting the rules.

Staff Attorney Wilhite responded that special counsel would be drafting the rules for the Michigan Department of Environmental Quality (DEQ) to expedite the review process at the state level. DEQ suggested special counsel Rhonda Ross to draft the rules because of her expertise in air quality rules and regulations. The cost is being equally shared with Detroit Edison and Consumers Energy. The rules would benefit the BWL if adopted. General Manager Pandy interjected that the rules would be standard for the large utilities and the BWL; consequently, the BWL as a smaller utility would have a level playing field with regard to meeting the air quality standards.

Commissioner Haggart inquired if the BWL will have input on the drafting of the rules.

Staff Attorney Wilhite responded that one of the reasons the BWL is agreeing to participate with Detroit Edison and Consumers Energy is for the opportunity to make input.

Commissioner Royal stated that from her legal experience in this area, often times small utility companies do not have an opportunity to help draft rules, and that could be detrimental.

Commissioner Wonch asked about the possibility of a conflict of interest on the part of special counsel Rhonda Ross.

Staff Attorney Wilhite responded that he would not be able to answer that question. He stated that presumably all three utilities would want the same outcome, but noted that this is a technical issue that would be best answered by the BWL environmental group.

Commissioner Royal stated that she would prefer to have a statement from Ms. Ross as to what she would do in the event of a conflict of interest to assure there is adequate protection to the BWL. Commissioner Royal indicated that she would like to have that question answered before she could commit to the resolution. She asked if there is an immediate need for an approved resolution.

Staff Attorney Wilhite stated that he could not respond to its urgency but that it would be helpful if the resolution could be passed at this time.

Moved by Commissioner Royal, seconded by Commissioner Christian to TABLE the motion regarding the use of special counsel until the next meeting.

RESOLVED, That the Board of Water and Light enter into Intergovernmental Agreements with the City of Lansing Police Department and the Lansing School District for the development of a community radio system consisting of ten (10) 800 MHZ radio frequencies and appurtenant fixed-end equipment.

Staff Commentary: The Lansing School District (LSD) and Police Department (LPD) each possess a license for five (5) 800 MHZ public safety radio frequency channels, which would be transferred to BWL for operation and maintenance of the Community System. The trunked radio system would have a capacity of 1200-1500 radios and would serve the present and future requirements of LSD, LPD and BWL. In consideration of the transfer of these frequencies, BWL would purchase 210 Motorola radios for LSD and 31 radios for LPD. Each entity would pay monthly costs per radio for operation and maintenance of the system (current cost is $8.25/radio per month).

Moved by Commissioner Christian, seconded by Commissioner Royal, that the resolution be approved.

RESOLVED, That pursuant to the provisions in Article II, Section 2.1 of the Board’s Rules of Administrative Procedure, the Board of Commissioners will meet on the following dates for the calendar year of 2002 unless otherwise notified or as a result of date conflicts with rescheduled City Council meetings:

Tuesday

   January 22

Tuesday

   April 23

Tuesday

   July 23

Tuesday

   October 22

Meetings will be held in the Board Room located in the Board of Water and Light Customer Service Center, 1232 Haco Drive, Lansing, and begin at 5:30 p.m.

RESOLVED FURTHER, That a notice of the meeting schedule be published in the Lansing State Journal the week of January 5, 2002.

Moved by Commissioner Christian, seconded by Commissioner Haggart that the resolution be approved.

Nominating Committee Chair Christian announced that votes cast for nominations to the Executive Committee resulted in a three-way tie. He requested one more vote to break the tie. Ballots were handed out and the Chair announced the results.

Resolution # 2001-10-13
EXECUTIVE COMMITTEE ALTERNATE

Commissioner Duncan was elected to serve as the Alternate member to the Executive Committee for fiscal year 2001-02.

COMFORT STREET PROPERTY – Northwest Well Field

Commissioner Duncan noted that at the last regular meeting, the Board adopted Resolution #2001-7-13 to authorize the conveyance of the property known as the Comfort Street property to the City of Lansing. The conveyance was silent on the City’s use of the land, but the intent was for parkland. Subsequent to the BWL’s adoption of the resolution, two things happened: (1) the General Manager brought to the Board’s attention the fact that there were potentially valuable trees on the property and (2) at the joint Commissioner/City Council meeting held August 23^rd, there was a lack of clarity as to whether or not the City wanted the property. There was also extensive discussion over neighborhood concerns about cutting down the trees. At that meeting it was agreed a site visit to Comfort Street would be held, which has not yet taken place. Commissioner Duncan indicated that based on discussion with the City Council, it appears that Resolution 2001-7-13 might be premature. She further indicated that if the Board proceeds with the conveyance, the resolution needs to be amended to specifically say that proceeds from harvesting of timber will be shared with the BWL.

Commissioner Callen stated it was his understanding the City needed the property to offset property they had relinquished. General Manager Pandy interjected that City property along Grand River Avenue and Turner Street was relinquished for the Ferguson condominium development in Old Town. The City has indicated similar property is needed as a replacement for a riverwalk.

Moved by Commissioner Duncan, seconded by Commissioner Christian to reconsider the vote on the conveyance of property known as the Comfort Street property (Resolution #2001-7-13) to the City of Lansing.

Resolution # 2001-7-15
Moved by Commissioner Wonch, seconded by Commissioner Duncan to reconsider original Resolution #2001-7-3 known as COMFORT STREET PROPERTY – Northwest Well Field.

RESOLVED, That the ~~22.8~~ 31.3 acres+ acres of land at Sunset Street (Comfort Street Property), which is under the jurisdiction of the BWL but no longer required in its entirety for BWL purposes, be transferred to the Department of Parks and Recreation or such other City department as the Mayor may determine appropriate, in consideration of the payment of $39,350 to the BWL and subject to the City assuming all environmental liability associated with the parcels, and indemnifying the BWL against the same.

RESOLVED FURTHER that this transfer shall be subject to a “use agreement” for BWL purposes and any easements or restrictions of record.

None

Erickson Station Cold Reheat Failure Report. General Manager Pandy reported on the Erickson Station cold reheat failure that occurred on October 17^th. This incident forced Erickson Station off-line when a 24-inch diameter steam line between the turbine and boiler failed. The line failure occurred as the plant was being brought back on line following a brief outage earlier that day. One operator reported a sore ankle and was treated and released. Major damage has been suffered by the plant resulting in a multi-million dollar loss. He called on Production Director Richard Peffley to provide an overview on the abatement, inspection, repair and reinsulation program to restore the cold reheat line.

Mr. Peffley displayed the Erickson repair schedule. The first project in process involves the cooling towers destroyed in the September 9^th storm, which is targeted for completion by mid-January, 2002 at an estimated cost of $4 million. That failure occurred when the BWL’s insurance deductible was still at $250,000. In addition, a $100,000 cooling tower upgrade will not be covered by insurance. The upgrade is necessary to address future needs from increased traffic due to the new General Motors facility. The second project involves the repair of the cold reheat line scheduled for completion by January 31, 2002 at an estimated cost of $3 million. The third project involves the turbine overhaul, targeted for completion by March 31, 2002 at an estimated cost of $2 million. The turbine was scheduled for inspection next fall, however, the schedule was moved up due to the extensive damage caused by the cold reheat failure. A portion of the cost for the turbine rebuild was included in the capital budget. The $3 million (cold reheat line) and $2 million (turbine overhaul) damages totaling $5 million will be a second claim against the insurance company, with an exposure of $1 million to the BWL. Mr. Peffley noted that the $3 million cost is assuming the cold reheat line can be repaired; otherwise the expense to replace the line could be $5 million. He further reported that the line failure occurred as the plant was being brought back on line following a brief outage earlier in the day. The line failure was due to an operations error. A leaky valve problem allowed water to enter the line, and a misinterpretation of the readings by the operating staff and the failure to drain the water subsequently caused the cold reheat failure. BWL Bulk Power and Resource staff has been investigating replacement bulk power needs.

Assistant General Manager Bill Cook noted that the BWL might take a revenue hit on wholesale power. Presently, the BWL is working to mitigate any potential negative impact.

Commissioner Haggart inquired if layoffs are planned while the Erickson Station is off-line.

Mr. Peffley responded that at this time, layoffs are not anticipated. The workforce at Erickson is at approximately 30 out of 320 production employees. The incident continues to be under investigation to determine how the operation error happened. Extensive training for the operations group will be held to ensure it does not happen again. The maintenance group at the plant will be busy with turbine #3 at Eckert Station to step up the process of bringing the Eckert unit back on line, ahead of the previous timeline of December 1^st.

General Manager Pandy noted that seven notices of possible disciplinary action have been issued to the employees who were on duty that day--three are non-bargaining unit and four are bargaining unit employees. He noted that an investigation is ongoing and that there may be employees who suffer disciplinary time off—not a layoff—but time off without pay if they were negligent in their duties.

General Manager Pandy stated that a revised mid-year budget will be brought to the Board in January as a result of consequences from the Erickson repair, coal contracts, and other factors affecting sales due to the weakening economy. At the request of Commissioner Callen, an interim report will be prepared by staff for presentation to the Board by the end of November.

Security Measures Heightened. General Manager Pandy reported that since the September 11 terrorist attacks, the BWL has been in a heightened state of security. Effective October 1, employees have started wearing pictured identification badges and essentially all production facilities have gone to a lock-down state. Security Administrator Jerry Mills presented an overview of the current security status of BWL water production facilities. Mr. Mills reported that the BWL remains vigilant and prepared for security encroachments. He reported that Environmental Protection Agency (EPA) Administrator Christine Whitman held a news conference on October 18 to talk about the fitness of the nation’s water supply and the steps the industry is taking to protect the water supply from attack. Ms. Whitman announced that the EPA believes the possibility of a successful contamination of the nation’s water system is small. It would take enormous quantities of harmful chemical agents to successfully compromise a water system. She also stated that water is not a good delivery vehicle for Anthrax. Systems already in place for treating drinking water before it comes out of the tap will, in many cases, remove the immediate threat to public health. Mr. Mills will be reporting on the security status of BWL electric facilities at the next meeting.

Corporate Diversity. General Manager Pandy reported that directors and managers attended a session on diversity as a business advantage, conducted by Reginald Williams of Procurement Resources, Inc. The premise of this initiative as a business strategy is that the organization needs to be sensitive to the diversity of customers, employees and suppliers. The organization needs to demonstrate leadership to drive staff initiatives that will support diversity in hiring, promotion practices and developing diverse suppliers in the procurement process. Mr. Pandy stated that management plans to develop a policy statement on diversity for Board review and consideration. A report will be presented to the Board in the near future on BWL organizational measures and strategy to ensure diversity in BWL operations.

Discussion on Scheduling Meetings. Commissioner Christian suggested reducing the number of meetings held on the same day of the regular Board meeting to no more than one meeting. He urged staff and the Commissioners to make an effort to limit the number of meetings on a given day to allow sufficient time to study the materials provided.

Chairperson Callen supported Commissioner Christian’s remarks concerning stacking meetings all in one day. He noted that holding Board meetings on a quarterly basis should make it more convenient to schedule special meetings and committee meetings on different days.

Ottawa Station Redevelopment Update. Commissioner Haggart inquired about the status of the Ottawa Power Station redevelopment project and asked how much money was invested to prepare the structure for development.

General Manager Pandy responded that there has been no activity since Convergency Centers advised the Board on June 26^th that they are not going to proceed with their proposal due to obstacles they are facing in the technology sector. Mr. Pandy indicated he has had discussions with the City on other possible options. Over $5 million has been spent to decommission the Ottawa Power Station involving equipment removal and salvage.

Commissioner Royal asked if it would be possible to determine how much money has been spent to date on the Convergency proposal taking into consideration personnel time and other expenditures.

Chief Financial Officer Tousley responded that he would attempt to gather information with respect to engineering costs, although overhead costs for staff time might be more difficult to collect. A report on this issue will be sent to the Commissioners.

Commissioner Royal emphasized that even if staff time were estimated, it would be good information to have.

Delayed Payment Charges Compared to Other Utilities. Chairperson Callen asked whether the Delayed Payment Charge of 5% required by the BWL is both reasonable and comparable in terms of the length and period allowed for a ratepayer.

General Manager Pandy responded that both Consumers Energy and Detroit Edison use 2% of the unpaid balance for their Delayed Payment Charge (DPC). Mr. Pandy stated that a memo prepared by Chief Financial Officer Dana Tousley with facts on this issue would be sent to the Commissioners. Mr. Tousley reported that the 5% DPC barely covers the BWL’s costs on an annual basis to collect from customers who do not pay on time. For the 12 months ended September 30, 2001, the BWL collected $1.6 in delayed payment charges. BWL collection costs for the same period were approximately $1.5 million. He indicated that a ruling from a court case stated the charges must reasonably approximate the additional costs charged for the DPC. Mr. Tousley further reported that the collection cycle is structured so that no one should go beyond sixty days or be charged a DPC more than twice. Approximately 90% of our customers pay their bills on time, 9.5% are paid late and incur the DPC, and 0.5% is written off as uncollectible.

Pepper Tree Condominium Association & Storm Damaged Trees. Commissioner Callen inquired about the status of the letter sent by Bruce McCrea, President of the Pepper Tree Condominium Association requesting the removal of storm-damaged trees overhanging the east boundary fence of the BWL’s Lake Lansing Road disposal site.

General Manager Pandy responded that a couple attempts have been made to schedule a meeting with representatives of Pepper Tree Condominium Association, but they cancelled due to schedule conflicts. Staff intends to follow-up with the Association.

THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY BOARD OF WATER AND LIGHT SUBJECT.

BWL employee Tracy Tolbert of Customer Service told the Board that comments she would be making are not intended to be negative. She stated that she has been employed by BWL since December 23, 1980. She has enjoyed many of the BWL’s benefits such as the Home Ownership Program for Employees, the tuition reimbursement program as well as other BWL perks. Ms. Tolbert has held different positions at the BWL and considers Customer Service to be the voice of the BWL because it is usually the first point of contact for the customer when requesting service or paying a bill. She commented that when the Share the Success (STS) program was last restructured, bargaining employees did not have the opportunity to get the full benefits of the program as it was set up originally. She expressed her opinion that “if it had remained as it was, the way it was set prior to the change, everybody would have benefited and been pleased with the way the STS program was originally developed.”

BWL employee Joseph Davis thanked General Manager Pandy for the numbers he presented relative to the customer choice program and the total cost for Tetra Tech inspections. Mr. Davis stated that he is not opposed to contractors, but is concerned with what customer choice will involve in the future. With respect to Share the Success, he commented that as president of IBEW Local 352 he cannot speak to open grievances, but stated it is his hope differences between IBEW members and management could be solved at the first- line or manager level.

On motion by Commissioner Royal, and seconded by Commissioner Christian, the meeting adjourned by unanimous consent at 7:55 p.m.

Size	2” x 0”
Moisture	27.30%
Ash	5.10%
Sulfur	0.35%
Btu/lb	8,800

Size	2” x 0”
Moisture	9.00%
Ash	10.00%
Sulfur	0.38%
Btu/lb	12,000

COMMUNICATIONS

Organizational Structure/Process

Workload/Resources

Management Communication

Resolution # 2001-10-1

Quarterly Internal Audit Report

Resolution # 2001-10-2

Resolution # 2001-10-3
DEFINED BENEFIT PLAN

Resolution # 2001-10-4
DEFINED CONTRIBUTION PLAN

Resolution # 2001-10-6
PURCHASE OF NEW DISK SUBSYSTEM FROM UNISYS/EMC

Resolution # 2001-10-8
GRANTING OF EASEMENT

Resolution # 2001-10-9
COAL SUPPLY AGREEMENT WITH ARCH COAL SALES

Resolution was TABLED
USE OF SPECIAL COUNSEL

January 22

Nominating Committee Chair Christian announced that votes cast for nominations to the Executive Committee resulted in a three-way tie. He requested one more vote to break the tie. Ballots were handed out and the Chair announced the results.

Resolution # 2001-10-13
EXECUTIVE COMMITTEE ALTERNATE

COMFORT STREET PROPERTY – Northwest Well Field

None

Tuesday	January 22
Tuesday	April 23
Tuesday	July 23
Tuesday	October 22

COMMUNICATIONS

Organizational Structure/Process

Workload/Resources

Management Communication

Resolution # 2001-10-1

Quarterly Internal Audit Report

Resolution # 2001-10-2

Resolution # 2001-10-3 DEFINED BENEFIT PLAN

Resolution # 2001-10-4 DEFINED CONTRIBUTION PLAN

Resolution # 2001-10-6 PURCHASE OF NEW DISK SUBSYSTEM FROM UNISYS/EMC

Resolution # 2001-10-8 GRANTING OF EASEMENT

Resolution # 2001-10-9 COAL SUPPLY AGREEMENT WITH ARCH COAL SALES

Resolution was TABLED USE OF SPECIAL COUNSEL

January 22

Nominating Committee Chair Christian announced that votes cast for nominations to the Executive Committee resulted in a three-way tie. He requested one more vote to break the tie. Ballots were handed out and the Chair announced the results.

Resolution # 2001-10-13 EXECUTIVE COMMITTEE ALTERNATE

COMFORT STREET PROPERTY – Northwest Well Field

None

Resolution # 2001-10-3
DEFINED BENEFIT PLAN

Resolution # 2001-10-4
DEFINED CONTRIBUTION PLAN

Resolution # 2001-10-6
PURCHASE OF NEW DISK SUBSYSTEM FROM UNISYS/EMC

Resolution # 2001-10-8
GRANTING OF EASEMENT

Resolution # 2001-10-9
COAL SUPPLY AGREEMENT WITH ARCH COAL SALES

Resolution was TABLED
USE OF SPECIAL COUNSEL

Resolution # 2001-10-13
EXECUTIVE COMMITTEE ALTERNATE